Daily Market Reports | Apr 25 2009
By Andrew Nelson
The Dow closed 119 points, or 1.5% higher, while the S&P 500 picked up 1.7% and the Nasdaq finished the day 2.5% stronger.
Stocks shot out of the gates on Wall Street last night, surging though a mid-afternoon drop in the wake of the “Stress Test” release from the government and pushing to close well above the lows. Solid earnings from some high profile blue chips helped propel the major indices, and bank stocks steadied after the US government lifted the veil on its bank stress-test methodology.
Stocks briefly trimmed gains in the mid-afternoon after US regulators released what was billed as a detailed report on how the government is running its “stress tests” of the leading US banks. However, the announcement was seen as anticlimactic by most, who said the latest report offered little new information. Banks did receive an estimate from the government on how much capital they will need to raise, but executives and US officials are not expected to negotiate on final figures until next week. Results from the tests won’t be announced until May 4.
Still, bank stocks were mostly higher for the day, with the KBW Banks Index gaining about 2.6%. JP Morgan Chase, US Bancorp and Wells Fargo were some of the bigger gainers among the large-caps. Although, about a third of the sector’s gain was erased in the last 15 minutes of trade, as traders looked to book in some of the surprise windfall.
The day marked an emphatically positive finish for a week that finally saw the end of the six-week winning steak. Although, given the steady afternoon push and a strong last hour, the question was in doubt up until just before the closing bell. The Dow had to finish above 8131 to seal its seventh straight week of gains, but fell 55 points short after a last 15 minute sell-off. All up though, the six-week run has boosted all of the major gauges nearly 30% off March’s 12-year lows.
Microsoft and American Express led the charge, rallying well into the double digits after posting better-than-expected results on Thursday. DuPont and Bank of America were also at the fore. Another dose of good news came from Ford, which is considered to be the healthiest of the three Detroit auto makers. The company said it lost US$1.4 billion in the first quarter as it contended with the worst quarter for the industry in 26 years. But that was still much better than many had feared.
All up, the Ford result amounted to a loss of US75c per share, but the market was expecting a loss in the neighbourhood of US$1.23. Revenue also tanked versus a year ago, but again topped estimates. All up, the stock rallied 16%, as news the company continued to restructure without US government aid, unlike rivals Chrysler and General Motors, was possibly liked best by investors.
The news certainly makes Ford the odd man out in the sector, with both Chrysler and General Motors looking to be near death’s door. Privately owned Chrysler could enter Chapter 11 bankruptcy protection as soon as next week if it can’t close deals with creditors and Italian car maker Fiat, while General Motors said late Thursday that it will temporarily shut down 13 of 20 North American plants this summer to cut inventory. The market was also rife with rumours GM could kill off its Pontiac car brand as it struggles to stay afloat.
Dow big shot and broad economic bellwether 3M also finished in the black despite reporting weaker quarterly sales and earnings in the morning. The company cut its full-year earnings forecast for the second time. However, the maker of everything from Scotch tape to power lines, which is seen as a proxy for the economy because of the broad range of its business, was helped by an improving view on the economy.
Dow stock Honeywell wasn’t quite as lucky, with the stock dropping on news of weaker quarterly sales that topped estimates on weaker earnings that met estimates. The problem was, the company also cut its 2009 profit outlook, citing the global economic slowdown.
On-line retailer Amazon.com helped provide a big boost for the Nasdaq after it posted a better-than-expected 24% rise in first-quarter profit. The relative strength of the generally smaller technology and consumer stocks on the Nasdaq was also a positive sign, with many market commentators saying the strength in this end of the economy represents a growing belief in an economic recovery.
Oil futures finished off what was a positive week on a high note, rising US$1.93, or 3.9%, to US$51.55/bbl, pushing back above the key US$50 a barrel barrier. Continued US dollar weakness, especially against the euro, provided much of the boost, as the fundamentals are still running contrary to a recovery in oil.
New inventory data this week showed US stockpiles of crude are at historic highs and there is still no sign of increasing demand. In another development closely watched by oil traders, the Wall Street Journal reported that OPEC Secretary General Abdalla Salem El-Badri said he doesn’t expect the oil cartel to cut production when the group meets next month. But traders and analysts alike seem to be pinning their hopes on the summer US driving season.
In currency markets, the US dollar continued its recent downward run, losing ground against the euro, the yen and the Aussie. The shrinking greenback plus a continuation of weak (if better than expected) economic news was a boon for gold, which also continued its recent run, jumping US$10.30 to US$913.50/oz.
The weak economic news came in the form of an 0.8% drop in March durable goods orders, but the result was still better than the 1.5% fall the market was expecting. March new home sales were also down from the previous month, after that month’s sales figure was revised higher. The US Census Bureau reported that sales fell to a 356,000 annual unit rate from an upwardly revised 358,000 unit annual rate in February, but again, this was better than the 337,000 unit annual rate the market expected to see.
Base metals were also positive pretty much across the board and continued to move comfortably away from their lows during late LME trading. Basemetals.com reports the complex was supported by an improved feel to sentiment in other financial sectors, principally equity markets, after today’s key US economic releases proved to be better than expected.
SPI futures jumped 43 points.
